The COVID-19 epidemic largely affected the affordable housing segment of the residential real estate market. Despite the magnitude of the pandemic weakening over the last year, the housing segment is still experiencing the aftereffects.

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According to a recent report by ANAROCK, the share of affordable housing in overall sales in the first half of 2023 shrank to approximately 20%, an 11 per cent slide compared to the corresponding period in 2022.

Following the trend, in the top seven cities, the affordable housing segment's proportion of the total housing supply fell to 18 per cent in H1 2023 from 23 per cent in H1 2022.

Despite the fall in supplies, affordable house purchasers have been paying roughly 20 per cent extra in EMIs over the past two years. From 6.7 per cent in the middle of 2021 to roughly 9.15 per cent now, variable interest rates on property loans up to Rs 30 lakh have increased dramatically, the report said.

"Home loan borrowers who were paying an EMI of approximately Rs 22,700 in July 2021 are now paying approximately Rs 27,300, an increase of approximately Rs 4,600 per month. This 20 per cent increase in the EMI has resulted in a jump of approximately Rs 11 lakh in the overall interest component, from approximately Rs 24.5 lakh interest payable in 2021 to approximately Rs 35.5 lakh today," said Prashant Thakur, regional director and head, research, ANAROCK Group.

The report further stated that at this point, the principal amount is greater than the total interest due over 20 years. Taking into account the LTV (Loan to Value) ratio, if a buyer wants to purchase a home worth Rs 40 lakh and his total amount borrowed is Rs 30 lakh for a 20-year term.
In this case, the purchaser would have made an EMI payment of Rs 22,700 in 2021, when interest rates were around 6.7 per cent.

Sales numbers across 7 major cities

According to the latest ANAROCK research, the total sales share of affordable homes went down to around 20 per cent in H1 2023 compared to 31 per cent in the corresponding period last year.
Of approximately 2.29 lakh units sold across the top seven cities in H1 2023, just 20 per cent or around 46,650 units were affordable homes.

Back in H1 2022, of approximately 1.84 lakh units sold, over 31 per cent or approximately 57,060 units, were in the affordable category.